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taxadvisor.uk, Chartered Certified Accountant

Category: Tax

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Experience: FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)

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My elderly relative (83 years) owns some land. Family wants

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My elderly relative (83 years) owns some land. Family wants to sell the land. Should elderly relative sell and pass proceeds to rest of family or does it make more sense to transfer the land to younger family members and then sell it?

Capital gains taxThere is capital gains tax payable on the sale/transfer of land by your elderly relative. It would be based on the difference between the cost price and net sale proceeds. It does not matter whether the land is gifted and then sold by the younger family members or pass the proceeds from sale to them.

Inheritance taxA gift of cash to other family members would be regarded as potentially exempt transfer for the puposes of inheritance tax and the seven year rule would apply .. it means If your elderly relative survives for seven years after making a gift to someone, the gift is generally exempt from Inheritance Tax, no matter what the value.

If the elderly relative were to die within seven years and the total value of gifts made is less than the Inheritance Tax threshold, then the value of the gifts is added to the estate and any tax due is paid out of the estate.

So my understanding therefore is that from a tax viewpoint it does not matter whether the land is transferred or not to other family members prior to being sold, the tax liability will still be the same. Is this correct?

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